Why Harley-Davidson may not be the perfect ride for Scott Walker

(Bloomberg) — For Republican presidential candidate Scott Walker, the Harley-Davidson motorcycle is a symbol of American freedom, independence and his own status as a regular guy. He rides a hog and has made the iconic machine a centerpiece of his campaign, staging events at Harley dealerships and even invoking the brand during his closing statement in last week's debate.

While it may seem natural for a Wisconsin governor to tout the product of a company headquartered in his state, there are ironies in Walker's embrace. Harley's success has been helped by two entities that the budget hawk has built his reputation battling: government and labor unions.

Since 2000, the motorcycle manufacturer has benefited from $54.5 million in local and state subsidies and more than $2 billion in federal liquidity support, according to Good Jobs First, a group in Washington that monitors business incentives.

"Harley is often held up as an American success story," says Barry Burden, a political science professor at the University of Wisconsin in Madison. "There are people who buy those bikes over other brands because they're American made. There were unions involved and there was government assistance at various times. It hasn't just been market forces that have made that happen."

LABOR PARTNERSHIP

Harley has won praise for working with its unions to make production more efficient. That stands in contrast with Walker’s message that he “took on the unions and won.” The two-term governor rose to national prominence after confronting public- sector unions in Wisconsin, transforming him into a hero for many conservatives.

Burden, who has closely followed Walker's career, says it's "fair" to ask about the role unions and the government played in keeping Harley-Davidson financially healthy and based in Wisconsin, given the governor's own rocky labor relations and his often-stated aversion to government interventions in the marketplace.

“Washington seems to think that success is measured by how many people are dependent on the government,” Walker said in his July 13 campaign announcement, held 15 miles west of the Harley-Davidson’s Milwaukee corporate headquarters. “We measure success by just the opposite, by how many people are no longer dependent on the government.”

But for a time, Harley-Davidson and its employees were at least leaning on the government. At the peak of the financial crisis in late 2008 and early 2009, the Federal Reserve also helped Harley by backstopping the commercial paper market.

Former Fed Chairman Ben Bernanke, in a 2011 letter to members of Congress, highlighted the manufacturer as a success story, saying that one of the Fed's programs to fight the financial crisis "provided support to businesses as diverse as Harley-Davidson and National Rural Utilities, when the usual market mechanism for their day-to-day funding completely dried up."

In total, the Fed provided more than $2 billion in backing to Harley, according to the Good Jobs First data.

“It did not involve a loan from the U.S. government to Harley-Davidson or any other company,” company spokeswoman Maripat Blankenheim said in a statement. “As one of many companies that issue commercial paper, Harley-Davidson was part of the program for less than four months.”

STATE AID

Harley-Davidson has also received millions in state assistance. The vast majority of those subsidies have come from Missouri, where in 1998 the company opened a factory after asking several states for economic development incentives offers.

The state has awarded Harley roughly $44 million, the Good Jobs First data shows. Much of it came in the form of a reduction in Harley’s state income tax liability, in exchange for meeting certain hiring and other goals.

In Wisconsin, the data shows $2.3 million in assistance, all before Walker took office. Not captured in that total is $8.3 million in worker training and other credits made available when the company updated and expanded product development and manufacturing facilities in the early 2000s, Blankenheim said.

Former Wisconsin Governor Jim Doyle, Walker’s predecessor, later offered Harley up to $25 million in tax credits, in exchange for the company keeping its Wisconsin factories open. Those incentives were offered in 2010 after Harley workers ratified seven-year labor deals that included a wage freeze and job cuts. The company had earlier threatened to pull production out of the state, if it couldn’t get favorable contracts.

Days after Walker was first elected governor, Harley announced that it would decline the nine-year tax credit deal because it might not be able to meet all of the state requirements.

Though the state aid to Harley predated Walker's time in office, the governor has shown a willingness to provide what some of in his party might call "corporate welfare" for home- state companies.

On Wednesday, he signed a bill that will provide $250 million in public money ($400 million, with interest) to pay for a new arena for the NBA's Milwaukee Bucks, and a controversial jobs agency he created has awarded more than $1 billion in economic incentives to Wisconsin companies since he took office in January 2011. That list includes Kohl’s department stores, another favorite shopping stop and campaign-trail topic for the governor.

KING OF THE ROAD

The owner of a 2003 Harley Road King, Walker started riding more than a decade ago as Milwaukee County executive. It's offered him a way to connect with a broad spectrum of voters who enjoy the machines, while also displaying a rebellious spirit that appeals to some.

During his campaign announcement week in July, he staged events at three Harley franchises and another shop that sells the bikes.

He burnished his everyman image by using dealerships as backdrops for events in Nevada, South Carolina, New Hampshire and Iowa. At the time, one franchisee said he would have felt awkward saying no, given the fact that Harley is based in Walker’s Wisconsin, even though the dealerships are independently owned and operated.

Walker, who owns a wallet and clothing labeled with the company's insignia, has already ridden a motorcycle in Iowa. He also plans to ride in New Hampshire and South Carolina, the two other states that host the first three nominating contests.

“Governor Walker has fought for the last four years to retain and help create jobs in Wisconsin," Walker campaign spokeswoman AshLee Strong said in a statement. "He is proud to support home-grown Wisconsin companies like Harley-Davidson that help keep workers on the job and keep the state’s economy moving.”

'PASSIONATE ABOUT OUR BRAND'

Harley says it's flattered by all of Walker's attention, but that it doesn't want to be drawn into the presidential race.

"He is passionate about our brand, like the millions of other loyal Harley-Davidson customers around the world," Harley's Blankenheim said in a statement. "Harley-Davidson Motor Company does not endorse any candidate and remains neutral in political campaigns.”

At the University of Wisconsin, Burden sees Walker's motorcycle riding as a little bit like former President Ronald Reagan riding horses.

"It's a representation of an image and outlook on life: independence, the open road and rural America," he said. "You also can't ask a candidate questions when he's on his bike, but it makes photos and it's a thing to do when you come to town."